Association of Small Foundations

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• Association of Small Foundations
• Introduction to Assessment Tools
• November 9, 2005

BUILDING A STRONG FOUNDATION
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Session Agenda

• Overview of Workshop Sessions
• Glossary of Key Terms
• Facilitated Discussion How do you currently
  approach assessment of your grantees?
• Facilitated Discussion What are some of your
  current assessment issues/questions?
• Presentation of Assessment Frameworks
• Case Study Discussion(s)
• Knowledge Sharing Wrap-Up

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Overview of Sessions
Assessment
Assessment
Capacity Building
Financial Detective
Bet on Leadership
Assessment
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Overview of Sessions

• Financial Detective How to assess your grantees
  financial health including benchmarking key
  variables
• Are they a financially sustainable organization?
• Are there any financial management red flags
  and/or trends you should be cognizant of?
• Do they leverage their resources effectively?
• Are they a a good grantmaking investment?
• Etc.

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Overview of Sessions

• Measuring Capacity of Nonprofit Organizations
  What is organizational capacity and how can you
  assess the needs of your grantees?
• What are the most effective capacity building
  levers within an organization?
• How can you assess and prioritize potential
  capacity gaps?
• What role can a foundation play in the capacity
  building process?

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Overview of Sessions

• Bet on Leadership How can you ensure that you
  are funding high performing leaders who are a
  good fit for their organizations challenges?
• What are the general leadership development
  themes within the sector?
• How to assess the leadership needs of an
  individual organization?
• How to assess the individual leaders of an
  organization?

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Glossary of Key Terms

• Due Diligence ensuring that the organization is
  capable of doing what it says it can do and
  assessing its actual track record of
  accomplishment
• Efficacy proof of mission impact
• Financial Sustainability the organization
  brings in sufficient revenues from diverse
  sources to fund current operations and invest in
  the future
• Gap Analysis the difference between whats
  needed and what exists
• Infrastructure the internal tools/systems/practi
  ces required to function as an agency
• Leadership Development maximizing the
  performance capacity of current leaders
• Net Surplus Margin revenues exceeding expenses
• Organizational Capacity the ability of the
  organization to deliver on its mission and
  business objectives assets are leveraged against
  opportunities
• Organizational Lifecycle the stages of an
  organizations development that are time, market
  and performance related
• Red Flag A performance issue you need to pay
  close attention to
• Replication the ability to copy programs that
  work in a manner that doesnt sacrifice quality
• Succession Planning identifying and cultivating
  the next generation of leaders within an
  organization anticipating future leadership
  needs and being proactive about meeting them
• Scope the broadness of the mission focus
• Scale the level/depth of the mission impact

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How do you currently approach assessment of your
grantees around the issues identified for this
workshop?
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What are some of your current assessment
issues/questions? Where would you like more
clarity?
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Three Assessment Frameworks

• Organizational Lifecycle Where does the grantee
  fit in terms of its natural development needs?
• Industry Five Forces What are the external
  forces affecting the grantee and its marketplace?
• Market vs. Program Growth Matrix What is the
  growth plan - scale or depth?

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Introduction To Lifecycle Framework

• Organizations develop and change based on a
  variety of factors
• Time
• Business/Mission Focus
• Performance
• Leadership Needs
• Market Considerations
• Other?
• The ultimate goal of the lifecycle approach is to
  match whats needed for the organization to
  effectively navigate its positive momentum across
  the lifecycle curve

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Organizational Lifecycle Model
DECLINE
MATURITY
DECAY
GROWTH
REEMERGENCE
EMERGENCE/ START-UP
Strategic Focus Innovation
Adaptation Reaction
TIME HORIZON
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Lifecycle Issues
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Introduction To Industry Five Forces Concept

• Organizations do not exist in isolation, in
  fact, they are affected by a wide variety of
  external factors/forces including
• The power of suppliers/funders
• Where is the coming from?
• The power of buyers/clients
• Who is being served?
• The threat of new entrants/competition
• Who else sees this as a market opportunity?
• The threat of substitutes/new solutions
• What other solutions exist?
• The rivalry amongst existing competitors
• How much competition currently exists?
• Each of the above listed individual factors can
  be significant to an organizations survival
  and/or success, however taken as a whole, their
  impact is often dramatic.
• High performing organizations understand this
  and are prone to be both knowledgeable and
  proactive about addressing the most critical
  issues
• Internal focus in and of itself is never enough
  to ensure long term sustainability

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Industry Forces Considerations
Do other reputable organizations see this as a
potential new opportunity?
Is there a scarcity or collaborative mentality?
How competitive is the Current funding
environment?
Threat of New Entrants
Is the client base growing or contracting and
what level of subsidy is required ?
Who else is funding the issue at what scale and
how stable are these revenue streams?
Rivalry Amongst Existing Competitors
Power of Buyers (Clients)
Power of Suppliers/ Funders?
Threat of Substitutes
Are there alternative/different/better ways to
solve the problem?
Source Michael Porter, Harvard Business School
(slightly adapted)
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Five Forces Issues
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Introduction to theMarket vs. Program Mindset

• Successful organizations typically growth in one
  of two ways
• By market (reaching more people with a similar
  product/service)
• Need core competencies to reach new audiences,
  manage increased volume, standardize operations,
  ensure quality and benchmark performance.
• By product/service innovation (reaching existing
  or similar clients with enhanced and/or new
  programs/services)
• Need core competencies to foster innovation,
  launch and test new programs/services, actively
  solicit client and expert input, constantly
  assess market dynamics and take financial risk.
• The mistake many organizations make is to try and
  do both at the same time which most often results
  in a confused strategic direction, misapplied
  resources and a dilution of the existing talent
  pool
• Both growth strategies have been proven to be
  effective, its simply a matter of matching core
  competencies with market opportunities

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Market vs. Program/Service Mindset
PROGRAMS/SERVICES
MARKETS
Source Philip Kotler. Kotler on Marketing.
Executive Book Summaries. 2000.
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Market vs. Product Issues

• Market
• Growing the number of customers/clients is of
  primary concern
• Product standardization and quality control is
  key
• Marketing/Communications infrastructure is
  critical
• Margins are typically lower requiring operational
  efficiencies and effective financial leverage
• Goal is breadth not depth
• Other?

• Product
• The quality of customer relationships is more
  important than quantity
• Product/program line extensions and innovations
  are expected
• Market research/customer satisfaction function is
  critical
• Margins are higher, but sales/development process
  is more complex
• Goal is depth not breadth
• Other?

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Two case Studies for Discussion

• 30 year old organization
• Current leader in place 10 years although
  leadership team seems to be operating in a state
  of on-going crisis
• Has grown to in excess of 250 employees (more
  than half are union) reaching several thousand
  families each day with early childhood
  development services.
• Program/service line is very focused and target
  population is low income families city-wide
  requiring significant third party, mostly
  government subsidies
• Reimbursement rates have remained flat for years
  and it is becoming increasing difficult to access
  requisite resources despite growing need/demand
• Competition for scarce resources is fierce and
  substitute solutions are entering marketplace
  (elementary school programs and charter schools)
• After 7 year period of rapid growth (300) has
  been forced to downsize the services by 25 the
  past 3 years
• A number of the peers have closed down operations
• Board is high profile, but not very engaged

• 7 year old Co-Founder led organization
• Rapid growth in revenue the past 3-4 years
• Goal is to use artistic expression to help young
  African American boys cope with trauma and become
  productive adults
• Serves very focused client base in a limited
  section of the city who have significant needs
• Regularly expands the scope of its services to
  meet needs of kids as they emerge
• F/T staff number fairly small (single digits) and
  there is a heavy reliance on volunteers/board
• Won many awards and has even been profiled on a
  major news program
• Programmatic approach is very innovative and the
  environment feeds on creativity
• A small number of funders exert significant
  influence
• Board is small and committed, but lacks
  resources/skills to be highly effective poor
  fundraisers

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Case Study Questions

• How would you assess the needs of the
  organization?
• What do you think the critical issues are before
  you begin your formal assessment? Why?
• What questions would you ask? Why?
• How would you envision helping this organization?

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Parting Thoughts on What Nonprofits Need

• Strengthening of their internal systems
• Diversifying their funding bases
• Improving their management practices
• Incorporating into their operations sophisticated
  contracting
• Marketing and fundraising strategies
• Tools to document their impact
• Capital funding and loans
• Assistance in using technology to implement
  programs and activities
• They need to learn to lobby to protect programs,
  services and missions

Source Cynthia Gibson, Helping Nonprofits Help
Us, Spring 2002, Carnegie Reporter,
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Session Wrap-Up

• What did we learn today?

• What can we do with this knowledge?

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Ed Robinson President Founder Capacity Building
Solutions Inc. 301/624-5686 robin_ed_at_capacity-buil
ding.com